Posts of: Gravitas

The issue of ICO regulation has been a thorn in the flesh in most countries. Initial Coin Offering (ICO) was officially invented in 2017 after cryptocurrencies and blockchain gained momentum and the value of cryptocurrencies skyrocketed giving everybody an appetite to invest in them. But it appears all these developments caught most if not all financial regulatory bodies flat footed and they were not able to craft laws to regulate the market.

In general, ICOs are poorly regulated and countries are doing all they can to put in place some governing rules for the ‘easy fundraising tactic’ that has been adopted by most Silicon Valley startups. Some countries like China and South Korea have already banned ICOs and as things stand there could be more countries like India that may follow suit.

But why all the fuss about ICO regulation?

ICOS offer an easy way of raising funds without having to follow the long process of accessing Bank Loans. With ICOs, anyone can raise whatever amount of money they want as long as they get people to like what they are doing.

Since anyone can offer an ICO, fraudsters have gotten an opportunity of conning people off their money by floating fake ICOS. They collect money from people and later the project collapses. Since everybody knows in ICOs there are high risks the project being fundraised for could fail, the fraudsters get away with the money without anyone questioning them.

ICO regulation by key cryptocurrency players

Let us look into some of the countries that have greatly adopted cryptocurrencies and see what they have done in response to ICOs.

China

China was the first country to ban ICOs despite the fact that it is the leading country in terms of blockchain adoption.

There have been resistance towards the ban but People’s Bank of China has issued a new warning to people regarding the investment in ICOs.

South Korea

South Korea has a very huge cryptocurrency user base. However, in 2017 it banned ICO listing terming them as unlicensed financial activities.

However, Korean legislative arm has been pushing for the government to lift the ban though there are recommendations that the ban can only be lifted if there is proper legislation to protect citizens from scammers.

Singapore

Following the ban of ICOs in South Korea and China, developers flocked Switzerland and Singapore since the two countries seem to have a favoring environment for ICOs.

In November 2017, immediately after the banning of ICO in South Korea and China, the Monetary Authority of Singapore (MAS) issued a guideline on how the digital token offerings will be undertaken. Any offer or issuance of digital token sales is supposed to comply with the securities laws and it is regulated by the MAS.

Switzerland

Switzerland is one of the countries that has done a lot in terms of regulating the cryptocurrency industry. The Swiss Financial Market Supervisory Authority (SFMSA) has actually come up with guidelines to regulate both cryptocurrencies and ICOs. The guidelines have stipulated how tokens are categorized.

The ICO guidelines make Switzerland friendly to blockchain-related businesses and developers are relocating their businesses there.

Malta

Malta is also another country that has done a lot in regard to regulating cryptocurrencies. It already has well-laid regulations for any cryptocurrency related activity and it has also created a supervisory body for cryptocurrencies. The supervisory body goes by the name Malta Digital Innovation Authority.

European Union

To date, the European Union does not have a specific framework of regulations governing cryptocurrency related activities. However, regulators are reported to be working vigorously to come up with regulations for the industry.

Currently, each European country seems to be adopting its own approach.

United States

There have been a number of ICO and cryptocurrency reported cases in the US and the SEC to seem to be struggling to even handle the issues. Currently, there are no specific rules governing ICOs in the US.

The current legal framework interprets ICOs as investment contracts and these make cryptocurrencies securities.

Since the introduction of the internet, the privacy of users has been on the decline. We have had very many cases of social media account being hacked, bank accounts being hacked and even cases of extortion have been reported. And to make the matter worse, even the ‘Big People’ are not exempt; we have even had social media accounts of presidents and large companies like Sony being hacked into.

Actually, an internet user will have to agree to very many cookies agreements while browsing the internet. And most, unfortunately, the cookies store very crucial information about users and if it falls on the wrong hands the user could be open to hacking. Normally, organizations use the information gathered through cookies for advertisement purposes but it does so without getting the consent of the user. Most are the times an internet user will just click “Agree” to cookies without even knowing the impact it has on their privacy.

The introduction of blockchain has brought a whole new aspect into the way network users share their information. Normally, a blockchain network user does not require identification. They only have to keep their passphrases to be allowed into the network. Actually, with blockchain technology, there is no central point of storing information; the whole network is normally decentralized and the user controls what goes on.

The decentralized nature of blockchain makes it more secure than the traditional modes like the internet where there is a central server, for storing users’ information, which can easily be breached.

Though blockchain comprises of a public shared database it can only record transactions between two parties. Therefore, only two parties are allowed to exchange information at any given time. There is no chance for the interference of a third party. This increases the privacy of the parties involved.

How does a blockchain network work?

Blockchain is basically a decentralized ledger of transactions. It uses cryptography technology to confirm who owns what at a certain time.

Therefore, if a user transfers any information (including digital currencies) to a fellow user, the transaction is stored into the ledger as a block containing the time of the transaction previous transactions and details of the transaction (what was transacted). However, the transaction will have to be verified by other participants (nodes) on the network. The verification is also done cryptographically and no information about the parties involved is revealed.

The blocks of data are then arranged in chronological order and third parties cannot alter them. This makes data shared through blockchain networks secure from manipulation by third parties.

What is cryptography?

Cryptography is the process of encrypting or converting ordinary plain data into a complex form that is not comprehensible without first decrypting the message. By using cryptography, only those to whom the data is intended can read and understand the message. Even if the information is tapped into by a third party, it will not be of help to them until they are able to decrypt it. The message is normally encrypted in a manner that only the entitled recipient can decrypt it.

This technology has been previously applied in securing back transactions through banking transaction cards, in computer passwords and also in e-commerce transactions.

Tools that enhance privacy in blockchain

To enhance the privacy of users, blockchain technology employs three tactics in addition to the cryptography technology. These tactics include:

Peer-to-peer network

Use of private and public keys

Zero knowledge proof consensus protocol

Peer-to-peer network

Peer-to-peer means that the networks are normally designed in a way that the users communicate and transact directly without the need of a third party between them. Blockchain networks are normally decentralized; users control everything.

Use of private and public keys

For the sake of the asymmetric cryptography used in blockchain networks to secure transactions, every user is required to have a public and private key. These two are sets of cryptographically related strings and numbers that help identify users.

The private key is ‘private’ and should never be shared with anyone. These are only used to access funds and personal information on wallets.

On the other hand, the public key can be shared and it is what users normally share during transactions.

Every transaction must have the public keys/addresses of the sender and receiver to denote the origin and the recipient of the information being shared. Information designated for a specific public key cannot find itself on the hands of another user.

The public addresses/keys do not reveal any private information of the involved parties. The keys act as pseudonymous and help conceal the identity of users on the blockchain network. By so doing the privacy of users is greatly enhanced.

The zero-knowledge proof consensus protocol

This is a way of proving a transaction is valid without revealing the information involved in the transaction. This is achieved using complex cryptographic formulas.

This is a new technology that was introduced to the blockchain that aims at increasing the privacy of blockchain users. Some times past, any blockchain user could access certain information about transactions like the public address of the sender and the receiver. The zero-knowledge proof consensus protocol aims at keeping the addresses completely anonymous. Any other person verifying the transaction can only know if the transaction is valid or not without knowing the addresses of the participants. Actually, the addresses of the participants were putting the users at risk since hackers could trace them later using the addresses.

Legality issues concerning blockchain privacy

General Data Protection Regulation

The European Union recently adopted the General Data Protection Regulation (GDPR) and there are concerns that blockchains do not comply with the regulations.

The GDPR was enacted to help protect European citizens against data breaches. It applies to those processing data in Europe and those processing data outside of Europe but for Europeans.

There is an issue of whether the public and private keys/addresses can be categorized as personal data according to the GDPR.

Also, GDPR gives citizens the right to have their personal data erased in case they feel the data is no longer needed. But with the nature of blockchains where the data stored is immutable, it could be impossible to have the personal data of EU citizens have their personal data erased.

International Revenue Service (IRS)

There are also concerns from the IRS since most blockchain users do not include revenue made through the blockchain networks for taxation in their income reports.

IRS as actually given a notice that the general tax rules should be applied to cryptocurrencies and failure to disclose revenue obtained from blockchain networks could earn them civil penalties and fines. However, due to the decentralized nature of blockchains, it is difficult to keep track of singular transactions across the networks. Also, the use of Public and private keys makes it very difficult to connect an individual to any transaction since their personal information is concealed and there is no way of knowing who did what.

The blockchain alliance

The ability of blockchains to protect the identity of users has made them an ideal hub for criminals to carry about their business without being noticed. As a result, the Blockchain Alliance was created by the FBI and Justice Department, so as to enforce legal restrictions on blockchains to minimize their use for criminal activities.

Blockchain privacy use cases

The blockchain privacy can be of vital importance if adopted in a number of areas despite the fact that there are concerns about its legality in other fields.

Below are the key areas where blockchain privacy could prove to be of importance:

Financial sector

Traditionally, any financial transaction requires a third party to verify it and the third party gets access to all the information about the transaction including the personal data of the participants and that information can easily fall into the hands of the wrong people.

However, the adoption of blockchain technology in handling financial transactions can greatly increase the privacy of the participants and also ensure that tier finances are secure.

Health sector

There are also issues about how health records are being stored. Currently, most hospitals tend to have copies of the health records of their clients; a physical record and an electronic record. But in most cases, the information ends up being misplaced or even manipulated as it gets shared.

The adoption of blockchain in storing health records could ensure that the privacy of the clients is maintained and the records would also become free from manipulation.

Legal affairs

Notarization of legal documents requires that the individuals are accorded the right privacy. But in some cases, personal information about individuals in cases has ended up leaking thus jeopardizing entire judicial processes in some cases.

The adoption of blockchain could greatly reduce the notarization fees, increase the speed of sharing information and also ensure maximum privacy for the individuals.

There is information that there is a draft bill named “Banning of Cryptocurrencies and Regulation of Official Digital Currencies Bill 2019″ circulating through the various departments of the Indian government. The bill, if adopted could see an end to the adoption of cryptocurrencies in India, which would be a great blow to blockchain developers throughout the world, considering the large population in India that is seen as a great opportunity for cryptocurrency communities.

The government is currently said to be consulting the different ministries on the issues so as to come up with a conclusion on the way forward.

Familiar sources indicate that a committee of comprising of the Department of Economic Affairs (DEA), the Central Board of Indirect Taxes and Customs (CBIC), the Investor Education and Protection Fund Authority (IEPFA) and the Central Board of Direct Taxes (CBDT) is supporting the idea to ban any cryptocurrency activities in India including the issuance, sale and purchase of the digital currencies.

The Committee could use the Prevention of Money Laundering Act (PMLA) to ban the cryptocurrencies since it argues out that the digital currencies are a haven for money laundering and other fraudulent schemes. The ministry of Cooperate affairs has previously said that the cryptocurrencies are being used to swindle innocent investors of their money.

This development comes after the Supreme Court of India gave the Indian Authorities 4 weeks to structure regulatory policies for cryptocurrencies so that the court could stop handing cryptocurrency cases including the demand for the reverse of the Reserve Bank of India circular on cryptocurrencies.

There were also concerns from India Economic Affairs Secretary that the digital currencies would greatly impact the Indian currency if they were to be fully adopted as modes of payments.

Though seen as one of the easiest means of raising funds for blockchain startups, ICO can become quite complicated. You will need to be very diligent for you to pull off a successful ICO. For sure you do not want to recommit the same kind of resources in case your ICO does not raise the required amount of funds in the first round though it is not bad to for a second round. But it is always frustrating not to meet your target in the first round. Actually, it will require a similar amount of resources especially financially to run a second ICO.

Therefore, it is important to ask the experts to do it for you at times. Do not trust yourself too much on issues you do not have much knowledge about. As a development team, deal with the Nitty-gritties of ensuring that the blockchain project is a success and find a professional to run the ICO project.

In most cases, ICOs ran by professionals or advisory firms end up hitting their targets within a very short time into their launch. We have even seen some ICO projects close within the first day of their launch due to excellent orchestrated processes.

There are very many companies out there that claim to offer ICO development services and at times it could be quite hard to choose the best among them. And for sure you do not want to gamble. If the ICO fails, even if you may have a second option, you will need the money that you don’t have (it is what you are trying to raise) to run a rerun of the ICO. Therefore, the correct choice is very crucial for the success of the ICO development.

Factors to consider when choosing an ICO development company

1. Services offered by the company

When looking at the services, you should ensure that the company can completely offer all that is required for the ICO without the need of bringing in a third party. If you find all the services in one company the better.

Some of the most crucial services to look for are:

Preparation of the whitepaper/litepaper

Tokenomics optimization (Creation of the coin, launching the coin, distribution of the coin and hosting the trading platform)

Creation of terms of sale for tokens

Escrow services and private placement

Legal advice

Marketing of the ICO (Conducting social media campaigns on ICO channels such as Facebook, and Twitter, a Communication plan for the token sale, Establishment of community managers/support, Organizing marketing roadshow, and Bounty Campaigns)

Building the ICO Community

Roadmap strategizing

Development of Smart Contracts

2. Platform confidentiality and security

The company should provide a platform that is confidential and secure. You, of course, do not want an excuse that your funds were stolen or there was a breach into the systems causing a halt of your ICO.

Also, the company has to assure you that all information regarding your blockchain project remains secure from hacking. You can’t be trying to come up with a blockchain system that is hack proof for everything to be quashed at the last minute when trying to raise the funds for the project. You better be sure that everything is secure first.

3. Rigorous technical expertise

You should entrust your project with a company that has a proven track record of conducting ICOs. This is easy to prove since you only have to look at the record of the ICOs it has conducted for its customers in the past.

Actually, a serious ICO development company like Gravitas International will always display the completed and ongoing ICO in their website/platform with as much information as possible. You should be able to look at the amount raised for each project. And you should go a step further of doing research to ensure that the project exists and if it was truly carried out by the company or it is just a way of advertising themselves.

4. Quick response

Another thing is how quick the company responds to your concerns. As their client, the company ought to give you a listening ear no matter how many projects it is running concurrently.

You do not want a company that takes weeks or days to respond to issues which could have a great impact on your ICO. You should look for a company that can give a response in minutes if not in seconds.

5. Reputation

The company should be reputable. You should look at some of its scores when it comes to the timelines of hitting ICO targets. Do all the ICO targets hit their targets and how long do they take to hit those targets? Are there any ICO that have had to be repeated since it did not hit its target?

The reputation of an ICO development company will in most cases give you a clear indication of what you should expect once you task them with conducting the ICO for you.

6. Reasonable charges

The last but not least is their charges for developing the ICO. You do not want to use a considerable amount of your raised funds footing the bill of running the ICO. a target of 1% or so of the raised funds could be a perfect choice.

Why Gravitas International is a perfect Choice

Gravitas International has proven to be a world leader when it comes to developing and running ICO for startups. It enjoys a pool of experts in the industry that ensure that every ICO meets its intended target within the shortest timeframe.

Below are the reasons as to why you should choose Gravitas International as your ICO development partner:

Equipped with an in house Legal Team

Serviced over 60 projects till date (as of May 2019)

Coin Listing and Market Making

Industry Leader in doing safe Token Swaps

Dapp Building

Poc/Mvp creation

Security Audit

Token Launching and Creation of Tokens

Creation of liquidity through our proprietary Gravitas market making solution

Have partners in their jurisdictions, such as China, Japan and South Korea, etc

Conducting social media campaigns on ICO channels such as Facebook, Telegram and Twitter

Ocean, a data marketplace, felt the pinch after missing its Token Sale using CoinList. It is always painful and embarrassing to miss funding targets and it gives a big setback to any project.

Ocean has a vision of becoming the world leader in the data marketplace. However, it requires a significant amount of funds to actualize that dream. It released its Version 1.0 beta network in April this year with big anticipation of succeeding in its quest.

The leaders have opted to change the listing firm and chosen to offer an Initial Exchange Offering (IEO) with Bittrex instead. They target to raise $6.77 million.

Their initial Token sale was only able to raise about $24 million falling short of its target by about $7 million.

There is a lot of hope that the company will meet its target this time round despite the fact that Bittrex is currently involved in a dispute with the Department of Financial Services in NY. The issues in New York do not affect Ocean’s ambitious move.

The founder of Ocean Protocol, Bruce Pon, attributed the poor token sale in the first offering to the poor US crowdfunding market. Though the US market is highly regulated, there lacked investors interested in the project.

With Bittrex, the customer base will widen to capture other regions other than the US.

And better still, Ocean has slashed the price of its token by half to $0.12 down from $0.25.

Initial Coin Offerings (ICOs) are prime investment opportunities for crypto/blockchain investors. However, their rewards come with very huge risks. It must be a matter of the more the risk the more the reward!

Nevertheless, investors should be well aware of the risks involved before putting in their fortunes in the projects. If you have a clear picture of how the ICOs operate and what you expect from the ICOs, then you stand a better chance of making the right decision when it comes to choosing the right ICO to invest in and also in identifying scams.

Let us look into some of the risks that you should put into consideration when considering to invest in ICOs:

Absence of proper regulation of ICOs

There are no specific regulatory bodies tasked with monitoring Initial Coin Offering projects. Therefore, the ICOs follow no regulatory requirements. As long as the blockchain team feels it has explained its thought to the crowd that is all.

Also, the fact that blockchain and cryptocurrency are decentralized, there are no regulating organs that govern how the tokens or funds are distributed. Everything is left to the users and the development team.

The absence of proper regulation gives way for scammers to take advantage. Anyone can come up with an ICO as long as they are able to convince people to give in their money. Scammers have taken advantage of this and conned lots of people using ICOs. Actually, due to this, China has hinted at banning ICOs.

Lack of professional vetting before an ICO is released to the crowd

In any financial investment, professional vetting is very important. It gives investors an idea of the financial condition of the company and analyses the business model of the company so as to help the investor in understanding the amount of risk they shall be involved in. By lacking this, ICO investors blindly invest their hard earned money into a company they literally know nothing about expecting the fact that they believe that the blockchain project they are about to launch will be successful.

The token market is driven by speculation

When investing in an ICO, an investor is purely after the tokens issued by the company with the hope that the value of the tokens shall rise. However, it is worth noting that the value of cryptocurrency tokens is driven by a variety of factors and the major one being speculation among the users.

Since crypto tokens are traded on platforms which are not open to supervision, you could see a daily fluctuation in prices of thousands of dollars. This makes the prices very volatile.

Managing the risks involved in ICO Investment

Invest in the amount of money you are ready to part with

The promise of high returns makes investors blind to the fact that it is not a guarantee that the project will become successful.

As a retail investor, if you want to invest in an ICO, ensure that you have no other plans for the money that you set aside for the ICO. If you plan for that money and the Blockchain project fails, you shall be left in disappointments and it could even cripple you financially.

Invest where venture capitals (VCs) have invested

Try to look for ICOs where VCs have invested. VCs are able to do the background checks to ensure that they are investing their funds in a business that has good returns. This way, you shall be guaranteed that the ICO is not a scam and that it also has higher chances of succeeding.

Invest in ICOs that have a source code ready for implementation

Serious ICOs, have open source codes that investors can look into. If the ICO has no source code, forget about it. It could be a scam.

Also, get programming experts to analyze and find out if the source code is capable of doing what the development team has outlined in their white paper.

Brave Browser (a web browser just like the likes of Chrome and others) had promised that its registered users shall be paid for viewing online ads. The promise was made during the Initial Coin Offering (ICO) and users are can now enjoy the benefits since the promise has now be actualized. According to an announcement made by Brave on 24th April 2019, the users shall start getting a share of the revenue coming from the ads.

So let’s look at what is in for the users:

First of all, the program of sharing the revenue will only be available through the new MacOS, Windows and Linux Operating Systems upgrades.

The ads will be opt-in ads and they will not replace the normal ads.

Once a user clicks on a Brave Browser sponsored ad, they will be directed to a page containing more info about the particular ad related offer.

Brave Browser is offering a 70 percent revenue sharing program and it is paid using the Basic Attention Token (BAT) directly to the user’s BAT wallet.

Some of the suppliers who users should look out for BAT ads from include: MyCrypto, Home Chef, BuySellAds, ConsenSys, Vice, eToro, TAP Network, Ternio BlockCard, The Giving Block, Fluidity, Uphold and AirSwap.

There are thousands if not tens of thousands of ICO projects out there. Blockchain developers have identified a simpler way of raising capital to implement their blockchain projects. And at the same time, investors have also gotten an opportunity to rip big from the blockchain projects through the ICOs.

However, not every ICO is worth investing in. ICOs are known to be poorly regulated and chances of landing into the hands of a scammer are very high. Actually, whenever you are investing in an ICO, you are only gambling on the value of the crypto token issued to you. You only have your fingers crossed that the project will gather momentum and attract customers in line with whatever solution that the blockchain project is trying to solve. Otherwise, if the project doesn’t pick, your money goes to waste and there is no way of claiming it back.

Nevertheless, despite the risks involved, there are still very great chances of ripping big from ICOs. If you correctly identify the best ICOs, then you shall earn yourself some good money when the project picks and the value of the issued crypto tokens rise.

But how can you identify an ICO project that will give you good returns? What is the secret? We shall go through some factors that you should consider when choosing an ICO project to invest in.

Factors to consider when choosing an ICO

Gather facts to prove that the ICO is not a scam

This can be very hard since no scammer will portray himself as one. Actually, scammers are very good at concealing themselves and using very attractive advertisement language that sweeps you off your feet very easily. But as a serious investor, always take your time before investing your hard earned money. You don’t want to lose that which you have labored hard to acquire to some person sited in an office waiting for you to give him the money and then vanish.

A genuine ICO will have a real website that isn’t duplicated anywhere else. Also, the contact and location of their head office are normally well indicated on their official website. Before launching an ICO, any serious developer knows that they should have a whitepaper to explain what they intend to do, what they have done so far so that they can convince the investor why they should give them money. Your main attention should be on the development team.

Go through the information on the development team very carefully looking to see if you can spot any misplaced information like if they went to school which cause they took and what role they are playing in the project to see if they match. Of cause, someone can’t do something they aren’t experienced in and you expect that project to be a success. The best ICOs are those where the development team has given links to their social media since you can be able to follow up on them.

Look at the ICO community

You don’t want to be the only person interested in the ICO. If that is the case then there is a problem. A promising project attracts as many investors as possible. Actually, this is a way of gauging to see if the project has any prospects of picking or not.

You should also look for an open supporting community. There should be a social group like a telegram chat group or Facebook, Reddit or Twitter where you can interact with your fellow investors. That way, you will be able to identify any concerns raised by other investors.

You should also ensure that the ICO project does not have bounty threads or posts since they could be used to spread propaganda information which does not give the clear picture of the entire blockchain project.

A genuine ICO project will have the development team send out press releases and take interviews in the media houses to try and sensitive the people about the project and explain to them what they want to do so that the people can get interested in the project. There is no need for bounty threads or posts.

Confirm the stage of the project

Any serious blockchain project should have a roadmap that clearly outlines the timelines for achieving the various milestones along the development stages.

Before asking for funds through the ICO, the developers should have done something. They don’t just ask for money to start everything. No! There has to be proof that the project is indeed a serious project and that it has already started and it has reached a certain stage.

If possible, find an ICO that is as close as possible to the launch of a fully functioning blockchain project.

You should never invest in a blockchain project that hasn’t written its source code. The code should be ready waiting for implementation.

Look for Venture Capital (VC) Investments

VCs will never invest in a project that has the slightest signs of being a failure. Therefore, if you invest in an ICO project with an established VC, you are guaranteed that the project will pick.

And any blockchain that gets a venture capital investments will gladly display it for everyone to see since it gives other investors’ confidence. But also be careful to confirm if the VC is well established.

Carefully read the white paper

The white paper will enable you to know exactly what you are investing in. by reading through the white paper, you shall know what the entire project is all about.

If you find the project viable, then why not invest? However, you should take your time and even do research into what the blockchain project claims they want to tackle. Is it something that will interest the community? Will it gain the attention of the intended audience?

A good white paper will outline the legal framework between investors and developers. It will also outline the team behind the project and their contact. You should also look for information on the token distribution. The token distribution should be in line with the roadmap. This is because a certain amount of funds will be required for every phase of the roadmap.

For security reasons, you should also ensure that the funds are stored in a cold wallet or in an escrow wallet.

Analyze their source code

The source code should be open source code. If it is not open source code, then that is a red flag. A genuine ICO project will be careful to put everything in a transparent manner.

Go through the code or find an expert to go through it and identify if it is able to meet the challenges being addressed by the blockchain project.

Conclusion

After evaluating the ICO project based on the above factors, you should be good to go.

However, you should remember that ICOs are poorly regulated and it could be hard to ever get your money back in case the projects fails. Therefore, it is advisable to invest an amount that you are ready to part with. You should not have too much attachment to the money that you invest. If that is the case, you better not invest since if the project fails, then you will be very heartbroken and you could easily be depressed.